Problem 4-3 spreadsheet attached and questions.

Problem 4-3 (LO 2) 70%, equity, beginning and ending inventory, subsidiary seller. Refer to the preceding facts for Panther's acquisition of Spider common stock. On January 1, 20X2, Panther held merchandise acquired from Spider for $8,000. This beginning inventory had an applicable gross prot of 25%. During 20X2, Spider sold $30,000 worth of merchandise to Panther. Panther held $6,000 of this merchandise at December 31, 20X2. This ending inventory had an applicable gross prot of 30%. Panther owed Spider $6,000 on December 31 as a result of these intercompany sales. 1. Prepare a zone analysis and a determination and distribution of excess schedule for the investment in Spider. 2. Complete a consolidated worksheet for Panther Corporation and its subsidiary Spider Corporation as of December 31, 20X2. Prepare supporting amortization and income distribution schedules. Use the following information for Problems 4-3 and 4-4: On January 1, 20X1, Panther Corporation acquired 70% of the common stock of Spider Corporation for $350,000. On this date, Spider had the following balance sheet: Spider Corporation Balance Sheet January 1, 20X1 Assets Liabilities and Equity Accounts receivable . . . . . . . . . $ 60,000 Accounts payable . . . . . . . . . . . $ 40,000 Inventory . . . . . . . . . . . . . . . . . . 40,000 Bonds payable . . . . . . . . . . . . . 100,000 Land. . . . . . . . . . . . . . . . . . . . . . 60,000 Common stock, $1 par . . . . . . . 10,000 Buildings . . . . . . . . . . . . . . . . . . 200,000 Paid-in capital in excess of par . 90,000 Accumulated depreciation . . . . (50,000) Retained earnings . . . . . . . . . . . 112,000 Equipment . . . . . . . . . . . . . . . . . 72,000 Accumulated depreciation . . . . (30,000) Total assets. . . . . . . . . . . . . . . $352,000 Total liabilities and equity . . . $352,000 Buildings, which have a 20-year life, are understated by $150,000. Equipment, which has a 5-year life, is understated by $58,000. Any remaining excess is considered to be goodwill. Panther uses the simple equity method to account for its investment in Spider. Panther and Spider had the following trial balances on December 31, 20X2: Panther Corporation Spider Corporation Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116,000 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000 132,000 45,000 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000 56,000 Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 60,000 Investment in Spider. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378,000 Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000 200,000 Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (220,000) (65,000) Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 72,000 Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (90,000) (46,000) Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (60,000) (102,000) Bonds Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (100,000) Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (100,000) (10,000) Paid-In Capital in Excess of Par . . . . . . . . . . . . . . . . . . . . . . . . . . . . (800,000) (90,000) Retained Earnings, January 1, 20X2. . . . . . . . . . . . . . . . . . . . . . . . (325,000) (142,000) Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (800,000) (350,000) Cost of Goods Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450,000 208,500 Depreciation ExpenseBuildings. . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 7,500 Depreciation ExpenseEquipment. . . . . . . . . . . . . . . . . . . . . . . . . 15,000 8,000 Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,000 Interest Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 98,000 Subsidiary Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,000) Dividends Declared. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 10,000 0 Prob 4-3 D&D A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 B C D E F G H Book Value Market Value Life Problem 4-3 Intercompany merchandise sales - BI & EI, Sub Seller Common Information Ownership interest Price paid (including direct acquisition costs) Year of consolidation (1 = year of purchase) 70.00% 350,000 2 Acquired company's balance sheet before purchase Book Value Market Value Life Priority assets: Total priority assets - - Total liabilities 0 - - Stockholders' equity: Common stock Paid-in capital in excess of par Retained earnings Total equity 0 - - Mkt value of net assets - 0 Nonpriority assets: Total nonpriority assets Existing goodwill Total assets - Intercompany Merchandise Information: Parent Sales Parent % Subsidiary Sales Subsidiary % Current year sales Unpaid account balance, year end Beginning inventory Ending inventory Zone Analysis Group Total Priority accounts Nonpriority accounts Ownership Portion 0 0 Cumulative Total 0 0 0 0 Price Analysis Price = Assign to priority accounts Assign to nonpriority accounts Goodwill Extraordinary gain 350,000 0 full value Allocation Tables Nonpriority Accounts Total Goodwill Extraordinary gain Market Percent - Available Assign - Total adjustments Adjust - 70.00% Amortization - Page 1 - - - - Determination and Distribution of Excess Schedule Price paid for investment: Less book value interest acquired: Common stock Paid-in capital in excess of par Retained earnings Total equity Interest acquired Excess of cost over book value (debit) Adjustments: Book - - Prob 4-3 Schedules A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 B C D E F G Annual Amount Current Year Prior Years Total Key Problem 4-3 Amortization Schedules Year of consolidation Account adjustments To be amortized 2 Life Total amortizations Intercompany Inventory Profit Deferral Parent Amount Beginning Ending Income distribution schedules: Subsidiary: Internally generated net income Parent % DR Parent Profit Sub Amount CR Total NCI share Controlling share Parent Internally generated net income Controlling share of subsidiary Amortizations Total Page 2 Sub % Sub Profit Prob 4-3 Worksheet A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 B C D E F G H I J K Consol Net Inc. NCI Control. R.E. Consol. Bal. Sht. Problem 4-3 (concluded) Year of consolidation Cash Accounts receivable Inventory Land Investment in Spider Buildings Accumulated depreciation - bldgs. Equipment Accumulated depreciation - equip. Goodwill Accounts payable Bond payable 2 Trial Balance Panther Spider 116,000 132,000 90,000 45,000 120,000 56,000 100,000 60,000 378,000 800,000 (220,000) 150,000 (90,000) (60,000) - Common stock - Spider Paid-in capital in excess of par - Spider Retained earnings - Spider Eliminations Dr Cr 200,000 (65,000) 72,000 (46,000) (102,000) (100,000) (10,000) (90,000) (142,000) Common stock - Panther Paid-in capital in excess of par - Panther Retained earnings - Panther (100,000) (800,000) (325,000) Sales Cost of goods sold (800,000) 450,000 (350,000) 208,500 30,000 15,000 140,000 7,500 8,000 98,000 8,000 Depr. expense - building Depr. expense - equipment Other expenses Interest expense Subsidiary income Dividends declared - Spider Dividends declared - Panther Totals Consolidated net income NCI share Controlling share NCI Controlling retained earnings Totals (14,000) 10,000 20,000 - - Eliminations and Adjustments: Page 3 L